Understanding why commodity-denominated valuation matters means understanding how money has worked β and failed β throughout history. From Roman coin debasement to the Nixon Shock, the record is clear.
Throughout history, societies have experienced devastating currency devaluations that illuminate the fragility of fiat money.
One of the most notorious hyperinflation events in history. The German mark collapsed from 4.2 marks per dollar to 4.2 trillion marks per dollar in just a few years. People carried cash in wheelbarrows to buy bread. Middle-class savings were wiped out overnight, radicalising an entire generation and contributing to the political instability that followed.
The Roman denarius fell from nearly pure silver to less than 2% silver content over decades. This currency debasement drove rampant inflation and economic instability that accelerated the empire's decline. Rome's experience is one of the earliest recorded examples of deliberate monetary debasement by a sovereign power β a practice that has been repeated by governments ever since.
The worst hyperinflation ever recorded. Prices doubled every 15 hours at the peak. The government printed a 100 quintillion pengΕ note. The currency was eventually abandoned and replaced by the forint at a rate of 400 octillion pengΕ to 1 β a number so large it defies comprehension. Hungary's collapse came in the immediate aftermath of World War II, driven by war reparations and reconstruction costs.
At its peak in November 2008, Zimbabwe's inflation hit 79.6 billion percent per month. A 100 trillion dollar note was printed β and was still not enough to buy a loaf of bread. The currency was abandoned entirely in favour of foreign currencies including the US dollar and South African rand. The proximate cause was government seizure of commercial farms followed by money-printing to cover fiscal deficits.
For thousands of years, gold and silver served as the primary forms of money across every major civilisation.
Often called the first age of globalisation. Most major economies pegged their currencies to gold, enabling stable international trade and investment. The era saw remarkable monetary stability, sustained economic growth, and near-zero long-run inflation. Exchange rates between gold-standard countries were essentially fixed, making international commerce predictable. The system collapsed with the outbreak of World War I as governments required deficit financing.
Silver was among the earliest metals used as money. The Greek drachma and Roman denarius formed the backbone of Mediterranean economies for centuries, underwriting trade across three continents. Silver's combination of scarcity, durability, divisibility, and malleability made it ideal monetary metal. The discovery of silver mines β from Laurion in ancient Attica to the mountains of Bolivia β repeatedly reshaped the economic power of civilisations.
The Spanish silver dollar (piece of eight) became the world's first truly global currency, accepted from China to the Americas. It remained legal tender in the United States until 1857 β long after American independence. Spain's extraction of silver from the mines of PotosΓ (modern Bolivia) flooded European markets with silver, causing a century-long inflationary episode known as the Price Revolution and demonstrating that even commodity money can depreciate when new supplies appear.
The Byzantine Empire's gold solidus maintained its purity and weight for over 700 years β an unprecedented monetary achievement in world history. This stability underpinned Byzantine economic dominance while Western Europe fell into monetary chaos. Merchants across the known world accepted the solidus without question. Its eventual debasement in the 11th century coincided precisely with the beginning of Byzantine decline, offering a stark illustration of the link between monetary soundness and imperial longevity.
The current global financial system is historically very young, and functions very differently from money throughout most of recorded history.
Established after World War II at a conference in Bretton Woods, New Hampshire, this system pegged major currencies to the US dollar, which was convertible to gold at $35/oz. It powered the post-war economic boom and created stable conditions for the reconstruction of Europe and Japan. The system worked as long as the US maintained sufficient gold reserves β but decades of deficit spending eventually made dollar-gold convertibility unsustainable.
Nixon's unilateral suspension of dollar-to-gold convertibility β the "Nixon Shock" β fundamentally and permanently changed the global monetary system. Every major currency in the world became a pure fiat currency overnight. Since 1971, the US dollar has lost over 85% of its purchasing power relative to gold. This single event is perhaps the most important reason why commodity-denominated asset valuation tells a different story than USD-denominated charts.
Modern central banking began with the Bank of England in 1694, created to finance government debt. Central banks evolved from private commercial institutions into public entities managing monetary policy via interest rates and open-market operations. The power to create money was gradually concentrated in these institutions, removing the natural supply constraint that commodity-backed currencies had always imposed on monetary expansion.
Created after the panic of 1907 to act as a lender of last resort, the Fed has grown from a financial stabiliser into the most powerful economic institution in the world. Its decisions on interest rates and asset purchases now move global markets and affect every dollar-denominated asset on earth. Since its founding, the US dollar has lost approximately 97% of its purchasing power. Whether that outcome was inevitable under any monetary regime remains one of economics' most contested questions.
The shift from commodity-backed money to fiat currency is one of the most consequential β and recent β transformations in economic history.
Cattle, salt, shells, and tobacco all served as money before precious metals emerged. Gold and silver won out because they possess the six properties of ideal money: durability, portability, divisibility, uniformity, limited supply, and universal acceptability. No other naturally occurring substances match precious metals across all six dimensions simultaneously β which explains why they were independently adopted as monetary media by virtually every human civilisation.
Paper money originated in Tang Dynasty China as merchant receipts for metal deposits. For most of its history, paper currency remained a claim on precious metal held in vaults β essentially a warehouse receipt. Unbacked fiat currencies β paper money backed by nothing but government decree β are a remarkably recent experiment. The complete global shift to fiat money occurred only in 1971, making the current monetary system less than 55 years old in a history of money spanning 5,000 years.
Cryptocurrencies like Bitcoin share some properties with commodity money β a fixed, algorithmically enforced supply and no central issuer β while existing as purely digital assets with no physical form. Central banks are now developing their own digital currencies (CBDCs), which would retain all the properties of fiat money while eliminating physical cash. Whether digital scarcity can replicate the monetary properties of physical gold remains a live debate in monetary economics and investment circles.
The most successful forms of money throughout history share six qualities: durability (it must last), portability (it must be moveable), divisibility (it must be subdivisible), uniformity (each unit must be identical), limited supply (scarcity is essential), and acceptability (it must be widely trusted). Gold and silver have excelled at all six for over 5,000 years across every major civilisation on earth.
Open the dashboard and watch how commodity-denominated valuations changed across the Bretton Woods era, the Nixon Shock, and the decades since.
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